Japan's Nippon Paper to buy US beverage container operation

TOKYO -- Nippon Paper Industries has agreed to acquire the paper cup and carton business of U.S.-based timber company Weyerhaeuser in a deal valued at roughly 30 billion yen ($283 million).

The Japanese company will establish a wholly owned subsidiary by the end of September, buying Weyerhaeuser's facilities in Washington state, as well as sales offices in Japan, the U.S. and South Korea. Nippon Paper will also take on about 500 employees. The acquisition will be the largest for the company since spending 42.6 billion yen to purchase a stake in a Chinese firm in 2010.

Weyerhaeuser's operation, which makes liquid packaging board for cups, milk containers and similar products, brings in roughly 40 billion yen in sales, making it the third largest in the world. The transfer would make Nippon Paper the world's No. 3 paper container maker in that business.

Nippon Paper faces a shrinking paper pulp market at home that is centered on paper for printing and other communication uses. The spread of electronic media and a dwindling population are contributing to the decline.

In response, major paper companies are looking abroad for new earnings sources. Nippon Paper expects overseas sales to rise from about 14% of all sales to as much as roughly 18%.

The percentage would still pale in comparison to the approximately 30% domestic rival Oji Holdings makes offshore. Nippon Paper sees the latest acquisition as helping it make up some ground on Oji, which got a jump on overseas operations.

Nippon Paper positions paper containers as a growth segment. The company sees sales of juice cartons rising by 6% a year. The American market for paper cups is also expected to grow by at least 2% annually as consumers shift from plastic products.

Weyerhaeuser has about $7 billion in annual sales. However, the American company is expanding its core timberlands business while restructuring its wood pulp businesses. Last month, Weyerhaeuser announced it will sell part of its cellulose fibers business to International Paper for $2.2 billion.